Why Do So Many Brilliant Small Business Entrepreneurs Fail to Expand Their Profitable Businesses?

It can be quite exhilarating to be entertained by brilliant small business entrepreneurs exalting their vision for growth, expansion, and incredible profits. However, many of these commendable individuals painfully fail to elevate their small businesses to the grand scale they were desirous of. This failure is often the direct result of the small business entrepreneur’s inability or lack of skills to transition the successful small business organization into a large organization which would entail sophisticated and complicated organizational infrastructure and operations.

Many of the largest, most successful and highly profitable businesses started as a family business (mom- and pop operation) or by a group of friends working in a back garage assembling a product the family patriarch or a friend invented. At this stage, this setup may work fine during the company’s early stages, but for it to grow and remain profitable, the small business must evolve by enhancing its operations.

Many companies in their building block years operate in an informal fashion, often the founders and those close to them (friends and relatives) take charge of all the functions of the small organization. These functions can range from extremely time-consuming inconsequential matters all the way to the functions requiring the entrepreneur’s genius to keep fueling the engine of the company’s core business. There comes a moment when the demand for the product grows, which would require an increased attention from the entrepreneurs to lead and continually innovate and deliver competitive products. It is at this juncture that the fate of the company is sealed. If the entrepreneur learns to transition from the mom-and-pop style of operations to an executive who manages through delegating managerial functions to his/her subordinates, then the entrepreneur would have a strong chance of growing his or her business. But, if the entrepreneur remains doggedly engaged in micro-managing all business functions and operations they will eventually become spread too thin and unable to both effectively lead and run day-to-day operations.

Being a successful entrepreneur is a distinct concept from being a competent business executive. With growth comes the need for increasing sophistication of an enterprise’s operations. The small company will need to advance its supporting operational infrastructure to efficiently handle a growing client base and business volumes as well as capitalize on new opportunities to expand.  Starting out, family business owners often serve as a “jack of all trades.” Because it’s their own company, they know what needs to be done and are used to doing whatever is needed. New employees, however, will need guidance. This includes providing them with written job descriptions and training. Implement a formalized system for measuring performance that gives employees regular and constructive feedback. Not only is this necessary to help them improve, but it also serves to motivate, compensate and reward them. This is particularly key to attracting and retaining nonfamily employees, who typically desire an objective performance evaluation system that’s applied to family and nonfamily employees alike. To minimize misunderstandings and conflict, issue a handbook of company policies to both family and nonfamily employees, and establish a formal advisory council to objectively mediate and develop solutions.

Also, at the core of a small business are its processes so the more one can systematize and document them, the more easily company can train its staff to follow them for increased efficiency, productivity, and quality. Professionalizing small business processes also involves looking at opportunities to streamline them. Reducing the amount of manual effort required can free up resources to process bigger business volumes. When analyzing the business processes,  attention should be paid to operations, sales and marketing, finance, human resources, and customer product and service delivery.

Often time, for many small business owners, their business vision, goals and strategies tend to primarily reside in their heads. Business planning discussions may informally occur on an impromptu basis around the dinner table or during family or friends’ gatherings. But, as the business operations become increasingly complex, formalizing the small business owners’ plans in a written document and communicating them companywide is vital. This will keep employees in the loop and empower them to make effective decisions and act in alignment with the company’s stated objectives.

The software applications and tools your small businesses use are likely limited to supporting specific business tasks and not as suited for managing overall, end-to-end business processes. As a company’s operations grow and become increasingly complex, another common issue is the proliferation of disparate applications and tools that aren’t linked or made accessible companywide. Supporting a professionalized, process-oriented business environment requires integrated IT systems. And integrated systems let employees easily access operational information and automate work effort for improved productivity.

Transitioning from a mom-and-pop shop to a professional business, small business owners may encounter growing pains. But reviewing their operational infrastructure and making upgrades where possible can help their company survive the economic downturns and thrive in the future.

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